Accountable Care Organizations were originally intended to be the crown jewel of President Obama’s cost-saving measures for health care. But it now appears many of the entities touted as potential ACOs have decided to pass on the whole idea.

ACOs are networks of doctors and hospitals that share responsibility for providing health care to patients. The concept is a little nebulous, but policymakers want ACOs to save money by streamlining services and coordinating care. Under the new law, an ACO would manage the health care needs for a minimum of 5,000 Medicare beneficiaries for at least three years.

During the debate over health care reform, the Obama administration repeatedly cited the Mayo Clinic, the Cleveland Clinic, Geisinger Health System, and Intermountain Healthcare as examples of how they would like ACOs to operate. But when the administration unfurled its new ACO program, the four so-called poster children all declined to participate, judging the reporting requirements too burdensome and the financial penalties for ACOs that don’t achieve savings as too harsh to justify the process.

The administration, disappointed by the result, created a new ACO program called “Pioneer” for "mature ACOs" as an alternate path. Once again, the poster children refused to sign on.

Invitation Declined

Michael Millenson, president of Health Quality Advisors LLC, says the new ACO legislation is not a mandate but rather an invitation to a party that’s been unexpectedly declined.

“ACOs are a great idea and have bipartisan support, but the devil is in the details. Say you have a party that you want to go to and it costs $1,000 a ticket. You may decide that the cost is too much. But if the ticket were only $10, then you and everyone else would go. That is what is going on with ACOs right now,” Millenson said.

Congress will have to act, he says.

“When they come back with a reworked bill, to what extent will they have fixed the problems? Everyone wants to know. Right now, the side that wants it to succeed is the most critical, and we’re nowhere near close to completely fixing it,” Millenson said. “They made it too bureaucratic or too expensive.”

Already a Failure?

Dan Boston, executive vice president of Health Policy Source, Inc., a health care consulting practice located in Washington, DC, says not to read too much into the decision just yet.

“I don’t think the failure of the poster children to sign on makes a blanket statement about the failure of the program. I think it’s a combination of things why they decided not to participate. Scheduling or the reimbursement arrangement might preclude their participation,” says Boston.

This was the case in at least one instance, says Megan Pruce, director of corporate communications at the Cleveland Clinic.

“The Pioneer program was designed for providers that have a capitation reimbursement model. Cleveland Clinic does not currently operate on this model. We are actively engaging in discussions that may lead to alternative solutions. We fully support the need to drive quality and reduce cost in health care,” Pruce explains.

Designed for Cost Containment

Devon Herrick, a senior fellow with the National Center for Policy Analysis, says the idea behind ACOs is that as new medical theories and techniques are learned they will not only save the government money on Medicare but also in other areas of health care.

“The Department of Health and Human Services (HHS) hoped that by bringing the doctors together in teams that it will streamline costs and result in improved care,” says Herrick. “The poster children declined because they saw the risks outweighed any rewards.”

One of the weaknesses of ACOs is they lack feedback loops, he says.

“HHS didn’t leave any room for experimentation. Economist Tim Hartford once said success is often born of failure. What that means is that every failure results in an opportunity to improve or refine the process. Under ACOs, HHS sets the rules—it’s codified into 429 pages. Everything is governed from the top down, so there is no opportunity to tweak the rules and improve them,” Herrick says.

Herrick is skeptical of ACOs justifying the administration’s effort.

“I don’t have a lot of faith it will work. Telling a less prestigious hospital to act like the Mayo Clinic is like telling K-Mart to be like Walmart. K-Mart would like to … if it could, but the reality is that it can’t,” Herrick said.

Loss of Autonomy

Roger Stark, a health care policy analyst at the Washington Policy Center, says the poster children declined to join because they don't feel they can deliver the same quality of health care within the model and remain financially solvent.

“Places like the Mayo Clinic, the Cleveland Clinic, Geisinger Health System, and Intermountain Healthcare deliver high-quality health care at a relatively low price because they are efficient and the doctors are part of the organization. It is easier to align the hospital with the doctors when everyone is in the same group and the goals are the same,” he says.

Joining the ACOs would remove the flexibility and freedom from government oversight and control which help make those hospitals great, explains Stark.

“We only have to look at the high cost and inefficiency of the VA hospital system to see what a government program would look like,” says Stark.